England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		03rd November 2006

MR JUSTICE WILKIE :

1. This is an application by Nicholas Hugh O'Reilly the Receiver and Manager of the realisable property of Robert William Briggs-Price for directions to assist him in carrying out his functions as a Receiver, pursuant to CPR 69.6(1), and to vary the Receivership Order to provide for whatever direction is given. Mr O'Reilly is the Receiver for the purposes of a restraint order made pursuant to the Criminal Justice Act 1988 and the Drug Trafficking Act 1994 on 5 July 2000 by Mr Justice Newman. The order was made by consent and contains what I am informed was a unique set of provisions.
2. At the core of the application is clause 14 of that order. That clause provides as follows:

"The Receiver shall release to the defendant from (an identified account) or such other source as is agreed between the defendant and the Receiver further money on legal expenses actually, reasonably and properly incurred in these proceedings and the criminal proceedings to which these proceedings are ancillary:

provided that;

before any monies are released for this purpose the defendant shall notify the Receiver of the following matters:

a. the general nature of the costs incurred

b. the time spent and by whom (whether partner, assistant solicitor or otherwise (in incurring the said costs)

c. the hourly rate applicable to the costs incurred and

in the event that the Receiver considers the claim to be in respect of costs that have not actually, reasonably or properly been incurred then the Receiver shall notify the defendant of the same and shall summarise his reasons for so considering in writing. The Receiver may thereafter at any time apply for the defendant's costs to be assessed and the whole claim for costs will then be subject to assessment on an indemnity basis in accordance with CPR part 48 but without the provisions of 48.8(2)(a)(b) applying."

3. Subject to what I will say about certain unique features of the other terms of the restraint order, Clause 14 is the type of clause which commonly appeared in restraint orders under these statutes. The law was changed by the Proceeds of Crime Act 2002 section 41(4) of which provides:

"But an exception to a restraint order must not make provision for any legal expenses which –

(a) relate to an offence which falls within sub-section (5)…."

By reason of this provision a clause such as clause 14 could no longer be included in a restraint order made pursuant to that statute. By legislating in those terms Parliament made a clear statement of change of policy and the facts of this case provide disturbing evidence as to why that change of policy was thought desirable. This application, however, is made under the old legislation and I must apply that legislation subject to guidance provided by cases on those provisions and on analogous arrangements.

4. The underlying facts can be briefly stated. On 22 June 2000 the defendant was charged with a number of drug trafficking offences and with the evasion of excise duty on imported cigarettes. On 5 July 2000 the restraint order was made. In April 2003 the defendant was convicted after a trial of drug trafficking offences and sentenced to 17 years imprisonment. On 19 April 2004 he pleaded guilty to being concerned in the evasion of duty on imported cigarettes and received a sentence of 4½ years imprisonment to run concurrently with that imposed in relation to the drug trafficking offences. The defendant sought leave to appeal against his conviction but leave was refused.
5. On 28 April 2005 the judge at Nottingham Crown Court made a ruling in connection with confiscation proceedings as to the benefit the defendant had made for the purposes of those proceedings. That ruling was that his benefit was £510,000 odd in relation to the evasion of import duty on cigarettes and £4 million in relation to the drug trafficking matter. On 30 June 2006 a confiscation order was made against the defendant in the sum of £510,000 odd in relation to the cigarette matter and £2.628 million pounds odd in relation to the drug matter. He was given until 31 October 2007 to pay that confiscation order with the total term of 8 years imprisonment in default. That figure represented the then realisable assets found by the judge to be available and it took into account the depletion of the assets subject of the restraint order by reason of payments of the order of £1 million made by the receiver pursuant to clause 14.
6. The defendant's legal representation had varied from time to time. At the time of the making of the restraint order the defendant was represented by Miss Sarah Gathercole a sole practitioner. She was privately instructed in relation to the criminal proceedings and the restraint proceedings until, on 1 July 2002, he obtained community legal funding in relation with the criminal proceedings. On or about 1 December 2003 Miss Gathercole ceased to act in connection with the criminal proceedings and the defendant was thereafter represented by a firm Draycott Browne. That firm was publicly funded up to the conclusion of the criminal trial. However, in connection with the defendant's application for leave to appeal his drug trafficking conviction that firm was privately instructed. Miss Gathercole continued to represent the defendant in relation to the restraint proceedings.
7. On 8 June 2006 Henry Milner and Co were instructed by the defendant in connection with the confiscation order proceedings and the restraint proceedings. It appears that the defendant's previous solicitors withdrew of their own volition in January 2006. Henry Milner and Co therefore represented the defendant at the confiscation order proceedings which took place on 30 June 2006. They instructed Timothy Kendall of counsel to appear on that occasion. It is clear from the transcript of that court appearance that Mr Kendall did not anticipate addressing the court at all. However he did so in connection with the arrangements for representing the defendant, to which I will return later. As for the substance of the hearing the position taken by Mr Kendall was that in the light of the ruling which had already been made as to the extent of the benefit received by the defendant he had no submissions to make in relation to the confiscation order which would be limited to the then agreed level of realisable assets.
8. The defendant has, I am told, applied for leave to appeal the confiscation order. The basis for that appeal is set out succinctly in grounds of appeal. It is clear that the subject of the appeal is the ruling made by the Crown Court in April 2005 as to the level of benefit. It is said that this should have been zero and that no confiscation order should have been made. This is consistent with the approach taken by Mr Kendall at the hearing on 30 June 2006 where he did not take issue with the court's assessment of realisable assets whilst, reserving his position in relation to the correctness or otherwise of the court's assessment of benefit.
9. As I have indicated, getting on for £1 million has been paid by the Receiver to the defendant's legal representatives from time to time pursuant to clause 14 of the restraint order. Of that sum, in the period up to April 2003 the receiver paid Miss Gathercole a total sum of £732,608.94 being £510,026.48 in relation to her own fees, £113,470.49 by way of disbursements and £109,111.97 VAT. This payment was made in respect of invoices rendered by Miss Gathercole. Subsequently the Receiver paid Miss Gathercole a further sum of £74,421.59 in relation to the restraint proceedings for the period after she ceased to act in the criminal proceedings. Those sums were paid pursuant to the unique terms of the restraint order the preamble to which read as follows:

"[Miss Gathercole]…hereby undertakes to the Court and to HM Customs and Excise that in the event of (1) her costs being assessed as provided by paragraph 14 therein and (2) any sum being disallowed on such an assessment, she will within 21 days of assessment pay to the defendant a sum equal to the sums allowed."

10. It is the position of the Receiver in evidence that he does not consider that Miss Gathercole's fees have been actually reasonably and properly incurred. He has notified her of this fact and has started the process of seeking detailed assessment of her fees. He also says in evidence that, because of the wording of the restraint order, "other than register my belief that costs sought by the defendant's solicitors have not actually reasonably or properly been incurred, I have no choice but to pay the amount claimed." It is not in dispute that the revenue and customs prosecutions office was being kept informed by the Receiver of the sums being claimed by Miss Gatherecole and the fact that she was being paid whatever she claimed. It is also not in dispute that at no time did the Receiver seek directions of the Court or seek to vary the terms of the restraint order but considered himself obliged to pay Miss Gathercole whatever she claimed subject only to his expression of opinion and, ultimately, the outcome of a detailed assessment. As a consequence the realisable assets have been depleted by the sums claimed by Miss Gathercole and Draycott Browne and paid by the Receiver. Any sum disallowed after the detailed assessment will have to be paid by Miss Gathercole to the defendant. Whilst any such sum will be subject to the general prohibition in the restraint order, the sum the subject of the confiscation order will have taken into account in the defendant's favour the sums actually paid by the Receiver but subsequently disallowed upon detailed assessment. Accordingly to that extent the defendant will derive benefit.
11. As for Draycott Browne's fees in relation to the application for leave to appeal against conviction, they claimed £195,815 of which £62,298.40 was in respect of solicitor's fees, £106,814.72 in respect of counsel's fees and £27,332.05 for VAT. I was told in the course of the hearing that the unique arrangement in respect of Miss Gathercole did not apply in respect of Draycott Browne. No application was made to vary the terms of the restraint order to accommodate the change of solicitors. Nonetheless I am informed that an agreement was made by the Receiver with Draycott Browne that he would pay them 65% of the sums they claimed, no doubt subject to detailed assessment of the balance. The effect of that has been that a further £128,000 odd has been depleted from the realisable assets. This is a not uncommon arrangement.
12. I must make it clear that there is no suggestion that any of the firms of solicitors or counsel involved in this case have acted improperly, though there is a question whether the fees claimed were actually and reasonably and properly incurred. Nonetheless, it is apparent that the system in place under the old legislation did give rise to a potential for abuse and this, in part, no doubt influenced Parliament in changing the law in the Proceeds of Crime Act 2002. Furthermore, the disturbing level of haemorrhaging of potential realisable assets by payment of very significant sums in legal fees sufficiently disturbed the Receiver that, when it became apparent that Henry Milner and Co were not prepared to act on a publicly funded basis despite a standing offer from the Crown Court for Legal Service Commission funding in favour of the defendant, the Receiver became "very uneasy about agreeing to release what is, as yet, an indeterminate amount of money for the purpose of paying future legal fees." He has now applied to this Court for directions.
13. The direction which he seeks is on the issue of principle namely whether he has permission or does not have permission to release restrained funds to Henry Milner and Co for legal expenses actually reasonably and properly incurred in respect of (a) the hearing of the application for a confiscation order on 30 June 2006 and (b) any appeal by the defendant against the making of that confiscation order. In addition it is agreed by all parties that directions are also sought in relation to the defendant's fees for the purpose of these proceedings under the restraint order.
14. The defendant argues that the Receiver must have permission under the terms of the existing restraint order. He says that, even though for a significant part of the proceedings he was in receipt of public legal funding and there is an offer of public legal funding, he is entitled to exercise his choice to instruct those who will only act privately and that sums should therefore be released from the restrained assets subject only to the condition that the expenses are actually reasonably and properly incurred. He says that the position has been made clear by the Court of Appeal in the case of Norris (1991) 2AER 395. In that case the defendant had been convicted and a confiscation order had been made. He had applied for leave to appeal both against the conviction and against the confiscation order. He applied for a variation of a restraint order made under the Drug Trafficking Offences Act 1986 to enable him to fund that appeal. It was argued by the Customs and Excise Commissioners that to vary a restraint order for that purpose would run contrary to the "policy steer" then found in section 13(2) of the 1986 Act namely that the powers under the act should be exercised with a view to making available for satisfying the confiscation order the value for the time being of realisable property held by any person by the realisation of such property. Thus, it was argued that, as all of Mr Norris's property was needed in order to meet the confiscation order, the policy of Parliament was that nothing, post conviction at least, should be released since that would militate against the achievement of the statutory object. The Court of Appeal characterised that as a fallacious argument because it assumed that which is in issue in the criminal appeal namely that there is a valid confiscation order which will be maintained and remain in force after that appeal has been heard. The Customs and Excise put forward an alternative argument which was that legal aid would be available in which subject to the outcome of the application Mr Norris had no funds. The Court of Appeal stated that it would be an odd position if the Court was forcing somebody to qualify for legal aid who would not otherwise for legal aid. Further there was a further policy consideration that, if forced onto legal aid, then the costs of the defence would come out of public funds whether the conviction was sustained or not. On the other hand if the money restrained were released and spent on the costs of the appeal there would be a saving for the legal aid fund and, if the appeal were to succeed, it would be the defendant's money that paid for the appeal subject to any order for costs which might be made by the Court of Appeal Criminal Division. The conclusion of the Court of Appeal was that "where there is a real appeal against conviction the appellant should be allowed to access the money, which might, in the event of the appeal succeeding be his own money."
15. The defendant relies on a decision of Mr Justice Hutchison, as he then was, on 28 October 1992 in the matter of D (DTOA 153 -154 -92) in which he followed the Court of Appeal decision in Norris. Accordingly, the defendant's case is that, however unsatisfactory the law may appear to be, and however justified the change in the law made by the 2002 Act, the position is that, on the issue of principle, restrained funds should be made available for the purposes of legally funding any appeal against the confiscation order and the proceedings in relation to the restraint order itself.
16. The Receiver adopts a position of neutrality on the issue of principle and is satisfied with having raised the issue.
17. The revenue and customs prosecution office acknowledges the strength of the authorities relied upon by the defendant but says these are old cases from 1992 and that subsequently the Courts have adopted a different policy one which is four square with the change of policy direction reflected in the 2002 Act.
18. Reliance is placed on a number of recent cases. Save for one of them I am not satisfied that they cast doubt on the approach identified by the Court of Appeal in Norris which is, of course, binding on me. The one case which may be of relevance is the SFO v X 2005 EWCA Civ 1564. That was an appeal by the SFO against an order of Mr Justice Jackson granting an application by X to vary terms of a restraint order made on 20 May 2005. The original order had limited sums to be expended on legal advice and representation to a sum of £1000 in connection with the restraint order itself. The variation sought was to enable sums to be released as were required for reasonable legal advice and representation in connection with the restraint proceedings and the criminal proceedings to which the restraint proceedings were ancillary. The Court of Appeal upheld the SFO's appeal against the variation which had been made. In so doing the Master of the Rolls in the leading judgment at paragraph 35 said that:

"If a defendant against whom a restraint order has been made wishes to vary the order in order to enable him to use the funds or assets which are the subject of the order, which I will call the restrained assets, in order to pay for his defence it is for him to persuade the Court that it would be just for the Court to make the variation sought. I would call that the burden of persuasion. For example, if it were clear that the defendant has assets which were not restrained assets, the Court would not vary the order because it would not be just to do so consistently with the underlying purpose of the restraint order."

and at paragraph 43 he said:

"…on an application to vary a restraint order in a case of this kind, where the order relates to all the defendant's assets the position in principle is that it is for the defendant's to satisfy the Court that it would be just to permit him to use funds which are identified as being caught by the order. If the Court concludes that there is every prospect of the defendant being able to call on assets which are not specifically identified in the order, I do not think that the Court is bound to vary the Order in the terms sought."

Thus the RCPO argues that, in the present case, although the restraint order relates to all the defendant's assets it is for the defendant to satisfy the Court that it would be just to permit him to use those funds caught by the order for the purposes of pursuing his appeal against the confiscation order. In making this assessment the RCPO invites me to conclude that the availability of legal services commission funding for the appeal is analogous to the defendant being able to call on assets not specifically identified in the order, or assets which others will provide for him, and that in those circumstances it would not be just to direct the Receiver to release funds as it would not be expenditure reasonably incurred given the availability of legal funding.

19. In my judgment that is an attractive argument and, were I free as a matter of authority so to decide, it might be decisive in favour of the position adopted by the RCPO. The problem, however, is that the Court of Appeal in the SFO and X went on to consider the availability of public legal funding as an alternative source of funding. The first instance judge had concluded that the refusal of the application to vary the restraint order "will create a serious impediment to the conduct of X's defence in respect of serious criminal charges…that would give rise to a breach of article 6 of the Convention on Human Rights." The Court of Appeal concluded that that statement was not justified. The Master of the Rolls in paragraph 55 said as follows:

"It appears to me that even if X cannot use restrained funds to pay for his defence there will be no infringement of his rights to a fair trial under Article 6 because he is entitled to public funding for the reasons I gave earlier. However the SFO does not take its stand on that point. It recognises, to my mind correctly, that where a defendant can show that he has no funds other than the restrained funds it will ordinarily be just to permit him to use the restrained funds in order to pay for the reasonable costs of his defence."

The difficulty for X in that case was that the Court of Appeal was not satisfied that the restrained funds constituted the entirety of X's assets and on that basis it decided that it was not just to order the variation in the terms of the restraint order which was sought. However, it is clear from what the Master of the Rolls said in paragraph 55 that it was not considered by the Court of Appeal that the availability of public legal funding did constitute an alternative source of funding which would prevent it being just to permit the restrained funds to be released for the purpose of paying for legal representation in connection with the criminal proceedings in question. Thus, far from undermining the approach taken by the Court of Appeal in Norris, in my judgment the statement by the Master of the Rolls in paragraph 55 of the SFO and X is consistent with the approach taken in Norris.

20. It therefore follows that, though I can perfectly understand the misgivings of the Receiver and have great sympathy with the policy concerns expressed by the RCPO and given effect by the Proceeds of Crime Act section 41(4), I am bound by authority to disregard the availability of public legal funding when considering whether to give a direction that the Receiver may release restrained funds for the purpose of funding the defendant's legal representation in connection with the making of the confiscation order, pursuing his appeal against the confiscation order, and in relation to these proceedings.
21. That is, of course, subject to the requirement that the sums claimed are actually reasonably and properly incurred. At present there is, in the restraint order, no effective provision enabling the Receiver to pay all, or a proportion, of sums claimed regardless of what may on detailed assessment be found to have been actually reasonably and properly incurred, such as there usually exists in such order. In my judgment the only sensible way of construing clause 14 in these circumstances is that there is no obligation upon the Receiver to make any payment unless he is satisfied that the expenditure has actually reasonably and properly been incurred but that he must exercise his discretion to seek assessment to the extent that he is not so satisfied and act in accordance with the outcome.
22. There is no application by the Receiver to vary the restraint order to introduce any provision, either capping the sum to be released or giving comfort to solicitors by requiring the Receiver to pay any particular percentage of the sums claimed even though not satisfied that those sums were actually reasonably and properly incurred. In my judgment that is a matter which will have to be dealt with between the parties by way of agreement or, failing agreement, by a further application by the Receiver for the restraint order to be varied to provide a sensible mechanism safeguarding both the restrained assets and the legitimate interests of the defendant and his legal representatives.
23. Accordingly I make the order that the Receiver has permission to release restrained funds to Henry Milner and Co, Solicitors, acting on behalf of the defendant for legal expenses actually, reasonably and properly incurred in respect of (a) the hearing of the application for a confiscation order on 30 June 2006; (b) any appeal by the defendant against the making of that confiscation order; and (c) in respect of these proceedings under the restraint order.